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Hapter: Studying This Chapter Should Enable You To
Hapter: Studying This Chapter Should Enable You To
1 Introduction
When you are in a job, working for In real life we cannot be as lucky
some other person, and you get paid as Aladdin. Though, like him we have
for it (you may be employed by unlimited wants, we do not have a
somebody who pays you wages or a magic lamp. Take, for example, the
salary), you are called a service- pocket money that you get to spend.
holder. If you had more of it then you could
When you provide some kind of have purchased almost all the things
service to others for a payment (you you wanted. But since your pocket
may be a lawyer or a doctor or a money is limited, you have to choose
banker or a taxi driver or a transporter only those things that you want the
of goods), you are called a service- most. This is a basic teaching of
provider. Economics.
In all these cases you will be called
gainfully employed in an economic Activities
activity. Economic activities are ones • Can you think for yourself of
that are undertaken for a monetary some other examples where a
gain. This is what economists mean person with a given income has
by ordinary business of life. to choose which things and in
what quantities he or she can
Activities buy at the prices that are being
• List different activities of the charged (called the current
members of your family. Would prices)?
you call them economic • What will happen if the current
activities? Give reasons. prices go up?
• Do you consider yourself a Scarcity is the root of all economic
consumer? Why? problems. Had there been no scarcity,
there would have been no economic
We cannot get something for problem. And you would not have
nothing studied Economics either. In our daily
If you ever heard the story of Aladdin life, we face various forms of scarcity.
and his Magic Lamp, you would agree The long queues at railway booking
that Aladdin was a lucky guy. counters, crowded buses and trains,
Whenever and whatever he wanted, he shortage of essential commodities, the
just had to rub his magic lamp on rush to get a ticket to watch a new
when a genie appeared to fulfill his film, etc., are all manifestations of
wish. When he wanted a palace to live scarcity. We face scarcity because the
in, the genie instantly made one for things that satisfy our wants are
him. When he wanted expensive gifts limited in availability. Can you think
to bring to the king when asking for of some more instances of scarcity?
his daughter’s hand, he got them at The resources which the producers
the bat of an eyelid. have are limited and also have
INTRODUCTION 3
alternative uses. Take the case of food activities of various kinds. For this,
that you eat every day. It satisfies your you need to know reliable facts about
want of nourishment. Farmers all the diverse economic activities like
employed in agriculture raise crops production, consumption and
that produce your food. At any point distribution. Economics is often
of time, the resources in agriculture discussed in three parts: consum-
like land, labour, water, fertiliser, etc., ption, production and distribution.
are given. All these resources have We want to know how the
alternative uses. The same resources consumer decides, given his income
can be used in the production of non- and many alternative goods to choose
food crops such as rubber, cotton, jute from, what to buy when he knows the
etc. Thus alternative uses of resources prices. This is the study of Consum-
give rise to the problem of choice ption.
between different commodities that
We also want to know how the
can be produced by those resources.
producer, similarly, chooses what to
Activities
produce for the market when he
knows the costs and prices. This is the
• Identify your wants. How many study of Production.
of them can you fulfill? How
many of them are unfulfilled?
Finally, we want to know how the
Why you are unable to fulfill national income or the total income
them? arising from what has been produced
• What are the different kinds of in the country (called the Gross
scarcity that you face in your Domestic Product or GDP) is
daily life? Identify their causes. distributed through wages (and
salaries), profits and interest (We will
Consumption, Production and leave aside here income from
Distribution international trade and investment).
If you thought about it, you might This is study of Distribution.
have realised that Economics involves Besides these three conventional
the study of man engaged in economic divisions of the study of Economics
about which we want to know all the
facts, modern economics has to
include some of the basic problems
facing the country for special studies.
For example, you might want to
know why or to what extent some
households in our society have the
capacity to earn much more than
others. You may want to know how
many people in the country are really
4 STATISTICS FOR ECONOMICS
poor, how many are middle-class, how of numbers relating to selected facts
many are relatively rich and so on. You in a systematic form) to be added to
may want to know how many are all modern courses of modern
illiterate, who will not get jobs, economics.
requiring education, how many are Would you now agree with the
highly educated and will have the best following definition of economics that
job opportunities and so on. In other many economists use?
words, you may want to know more “Economics is the study of how
facts in terms of numbers that would people and society choose to
answer questions about poverty and employ scarce resources that could
disparity in society. If you do not like have alternative uses in order to
the continuance of poverty and gross produce various commodities that
disparity and want to do something satisfy their wants and to
about the ills of society you will need distribute them for consumption
to know the facts about all these among various persons and groups
things before you can ask for in society.”
appropriate actions by the
government. If you know the facts it Activity
may also be possible to plan your own • Would you say, in the light of the
life better. Similarly, you hear of — discussion above, that this
some of you may even have definition used to be given seems
experienced disasters like Tsunami, a little inadequate now? What
earthquakes, the bird flu — dangers does it miss out?
threatening our country and so on
that affect man’s ‘ordinary business 2. STATISTICS IN ECONOMICS
of life’ enormously. Economists can
look at these things provided they In the previous section you were told
know how to collect and put together about certain special studies that
the facts about what these disasters concern the basic problems facing a
cost systematically and correctly. You country. These studies required that
may perhaps think about it and ask we know more about economic facts
yourselves whether it is right that in terms of numbers. Such economic
modern economics now includes facts are also known as data.
learning the basic skills involved in The purpose of collecting data
making useful studies for measuring about these economic problems is to
poverty, how incomes are distributed, understand and explain these
how earning opportunities are related problems in terms of the various
to your education, how environmental causes behind them. In other words,
disasters affect our lives and so on? we try to analyse them. For example,
Obviously, if you think along these when we analyse the hardships of
lines, you will also appreciate why we poverty, we try to explain it in terms
needed Statistics (which is the study of the various factors such as
INTRODUCTION 5
2010. Without the use of Statistics, it cannot be made unless we know the
cannot be determined what the actual requirement of oil. This vital
expected domestic production of oil information that help make the
and the likely demand for oil would decision to import oil can only be
be. Thus, the decision to import oil obtained statistically.
Recap
• Our wants are unlimited but the resources used in the production
of goods that satisfy our wants are limited and scarce. Scarcity is
the root of all economic problems.
• Resources have alternative uses.
• Purchase of goods by consumers to satisfy their various needs is
Consumption.
• Manufacture of goods by producers for the market is Production.
• Division of the national income into wages, profits, rents and interests
is Distribution.
• Statistics finds economic relationships using data and verifies them.
• Statistical tools are used in prediction of future trends.
• Statistical methods help analyse economic problems and
formulate policies to solve them.
EXERCISES